WORLD TRADE  
ORGANIZATION  G/TRIMS/W/79 
22 December 2010 
 (10-6867) 
Committee on Trade-Related Investment Measures Original:   English 
  
 
COMMUNICATION FROM INDONESIA 
 
Indonesia's replies to questions posed by the United States and 
 
comments made by Canada and the European Union during  
the Committee meeting of 1 October 20101 
  
 The following communication, dated 16 December 2010, is being circulated at the request of 
the Delegation of Indonesia.  
_______________ 
 
  Indonesia wishes to refer to the questions rai sed by the United States, and the comments made 
by Canada and the European Union during the mee ting of the Committee on Trade-related Investment 
Measures (TRIMS) on 1 October 2010 regarding Indonesi a's law applicable to investment activities in 
Indonesia's mineral and mining sector (Law No. 4 Year 2009 on Mineral and Coal Mining and the 
Government Regulation No. 23 Year 2010 on the C onduct of Mineral and Coal Mining Activities).  
Indonesia hereby wishes to provide the following clarification:  
Question 
 
 We are quite concerned about Indonesia's descri ptions of provision of its law relating to 
prioritizing the use of domestic goods and servi ces, in particular the following statements: 
 
 "Based on Article 87 of the Government Regulation No. 23 Year 2010, the IUP and 
IUPK must prioritize the use of domestic goods,  equipments, and/or supporting materials, as 
well as imported products being sold in Indonesi a used for mineral and coal mining activities 
that:  a) meet the quality and post-sales service standards, and b) guarantee the sustainability of supply and timely distribution.  The objective is  to support the growth of domestic industry 
through the mining sector. 
 
 This implies that when domestic goods, e quipments, and/or supporting materials do not 
fulfill the above-mentioned requirements, the IU P and IUPK will allow the imports of such 
products.  Plans to import must be reported to the Minister in charge of mineral and coal mining and must comply with relevant rules and regulations." 
 
• Is our understanding correct that, so long  as domestic goods of sufficient 
quantity and appropriate quality are availa ble, Investors are prohibited from 
importing goods, equipment and supporting material for use in their commercial activities?   
 
                                                     
 
1 Minutes of that meeting are contained in documents G/TRIMS/M/30 and Corr.1. G/TRIMS/W/79 
Page 2  
 
  Reply
 
  Article 87 of the Regulation does not constitu te a prohibition to import goods, equipments 
and/or supporting materials used for mineral and coal mining activities.  It only encourages the holder of Mining Permit or "IUP" and Special Mining Permit Holders or "IUPK" to use goods, equipment 
and/or supporting materials that are already av ailable in the Indonesian domestic market.  
 
Question 
 
 What does Indonesia mean by the statemen t that these provisions can be satisfied by 
using "imported products being sold in Indon esia"?  For example, does this refer only to 
specific articles of merchandise which were imported  into Indonesia prior to a certain date?  In 
the coal and mining sector, in which goods and equi pment can be expected to degrade with use, 
such a requirement would not have much meaning when supplies of previously imported goods 
are exhausted.  
Reply
 
 
 Imported products being sold in Indonesi a mean imported goods which are available in 
Indonesia.  Regulation No. 23 does not regulate d eadline for importing goods, equipments and/or 
supporting materials which will be used by the Mini ng Permit holders.  As long as the goods are not 
available, they may be imported.  
Question 
 
 In the alternative, does authorization to use "imported products being sold in 
Indonesia" allow investors to continue to impo rts goods and equipment of the same type which 
are currently imported?  While such a requiremen t would be less odious than a prohibition on 
imports, it would still prevent investors from taking advantage of new technologies developed 
outside of Indonesia.  
Reply
 
  As long as the goods, equipment and/or supp orting materials used for mineral and coal 
mining activities are not available in the Indonesian  market, the Mining Permit Holder or Special 
Mining Permit Holder may import it, so it does not prohibit investors to use any new technologies developed outside Indonesia.  
Question 
 
 In a nutshell, we are concerned that Indo nesia's answer could be understood to mean 
that in order to be permitted to undertake comm ercial activities in the coal and mining sector, 
investors are required to purcha se and use products of domestic  origin or from a domestic 
source.  Would Indonesia elaborate on the basis for its stated belief that the provisions being 
questioned are consistent with Article III of GATT 1994, Article 2 of the TRIMs Agreement, 
and Paragraph 1 of the Annex?  
Reply
 
  Again, we underline that Regulation No. 23 Y ear 2010 is not inconsistent with Article III of 
the GATT 1994, Article 2 and para. 1
 of the Annex of TRIMS Agreement as the Regulation does not 
prohibit import of any goods from outside Indonesia.  It does regulate the domestic as well as foreign 
Mining Permit or Special Mining Permit holders.    G/TRIMS/W/79 
 Page 3 
 
 
  Additional Information  
  The management of the minerals and coal mining sector is subject to control by the Indonesian government.  This is in order to pr otect the welfare of the people and strengthen the 
national economy.  It was within this spirit that the Indonesian government passed Law No. 4 in 2009 
and Regulation No. 23 in 2010.  Prior to this, in  1967, the government issued Law Number 11 
concerning the Basic Provisions of Mining.   Over the course of the following years, the 1967 Law, with its centralistic nature, was no 
longer able to keep pace with modern day developm ents and future challenges.   Amendments to this 
law were also deemed necessary due to the drama tic changes in Indonesia's regulatory and political 
landscape over the last decades.  The democratizatio n and reform of Indonesia's society and political 
system and the introduction of a new autonomy Law in 1999, further amended in 2001, had a 
significant impact on the mining industry.  
 The historical passing of the autonomy law resulted in the devolution of several central 
government powers to local authorities, notably in the natural resource management sector.  
Furthermore, the regulations governing Indonesi a's mining and mineral industry required further 
revision following the enactment of the Investment  Law No. 25 Year 2007 that required foreign and 
domestic investors be treated equally.  
 
__________